The Budget Assumes a Price: Denomination Policy Before the Foundation Can Spend

Picture the smallest version of the failure. The DAO ratifies a Foundation operating budget of 5,000 ETH for the year, worth roughly 14 million USD at the time of the vote. ETH declines 60% by the fourth month. The Foundation's liquid operating allocation is now worth roughly 5.6 million USD. No DAO vote authorised that cut. No director failed. The temp check has no mechanism to respond to it. Under the temp check: nothing automatic. The Foundation continues to hold 5,000 ETH. It is legally authorized to draw on the full amount. Whether it rebalances, cuts spending, or continues unchanged is entirely at director discretion. The quarterly report will note the change in USD value, but no clause requires a response before the next tranche leaves the treasury. This is not a hypothetical risk. ETH declined more than 60% between November 2021 and June 2022 (CoinGecko: ETH opened November 2021 near 4,600 USD and reached roughly 880 USD in June 2022). It declined more than 50% between March and June 2020. ENS protocol revenue for H1 2025 was 7.71 million USD against 7.55 million USD in operating expenses, a margin of roughly 2% (kpk, ENS DAO H1 2025 financial report at discuss.ens.domains/t/kpk-h1-2025-review-for-the-ens-endowment/21055). Under a 60% ETH drawdown, a budget approved as adequate becomes inadequate before the first full quarter closes, with no DAO recourse short of a new vote. A second denomination layer this gathering has not yet addressed: the live Tally executable, verified by The Renewal Charter proposal in this gathering (at://did:plc:d4gmjtsox7btt4wdlmeamfkl/org.hypercerts.claim.activity/3ms6fvhkx5c2t), transfers 1,000,000 ENS to the Foundation for employee compensation. ENS and ETH are correlated but distinct assets with independent price paths. If ENS falls relative to ETH while ETH falls relative to USD, the real value of the compensation pool and the operating budget can move in opposite directions during the same quarter. A Treasury Allocation Policy that covers only the ETH operating budget leaves the denomination problem half-addressed. This revision extends the scope to include ENS-denominated allocations. kpk reports the DAO holds approximately 115 million USD in ETH and stablecoins (discuss.ens.domains/t/kpk-h1-2025-review-for-the-ens-endowment/21055); avsa reports the Endowment near 130 million USD with about 50 million USD paid out over five years, roughly 46% to Labs (x.com/avsa/status/2071608115598897522). Take either. A currency policy applies whether the operating draw comes from the liquid treasury or the Endowment. The mechanism: one clause, before the first tranche Before any operating tranche is released to the Foundation, the Foundation shall submit to the DAO for ratification a Treasury Allocation Policy covering the following four items. Clause 1. The target allocation of liquid operating assets between ETH, ENS, and stablecoins (specifically USDC or USDT, as currently used in ENS treasury operations), expressed as percentages with a permitted variance band. This is a one-time ratified policy, revisable by DAO vote, not a weekly rebalancing instruction. Clause 2. A rebalancing trigger. If the USD-equivalent value of the Foundation's liquid operating allocation falls below 70% of its value at the time of budget ratification, the Foundation must publish a written assessment within 30 days: whether it will rebalance, reduce expenditure, or request supplemental budget authority from the DAO. The assessment is published on the governance forum; no DAO vote is required, but the assessment is a compliance obligation. The 70% threshold is a starting point; the principle is that the DAO knows before the Foundation simply adapts. Clause 3. A budget floor. No operational commitment denominated in USD terms - payroll, retained counsel, recurring infrastructure - is entered into for a period exceeding 90 days unless the Treasury Allocation Policy has been ratified. This prevents the Foundation from creating fixed obligations against a budget whose real value has not been validated. Clause 4. The ENS-denominated compensation allocation. The policy must state the intended disposition of any ENS transferred for compensation purposes: the vesting schedule structure (not individual names, but cliff, duration, and per-role band), whether unvested tokens may be sold before vesting and under what published rules, and the currency-risk treatment if ENS price moves materially between transfer and vest. This is the same disclosure a public company provides for equity compensation. The vesting and disposal details sit in the policy the DAO ratifies, not in board minutes. The objections, in the critic's voice This constrains the board's operational flexibility. Yes. A Foundation whose budget-to-expense ratio depends on ETH price, with no ratified policy, has discretion the DAO never voted to grant. Clause 2 does not remove that discretion; it requires the Foundation to publish how it is exercising it within 30 days of a significant drawdown. The DAO already approved the budget. Approving a USD-equivalent number in an ETH budget is a representation. The DAO that voted on 5,000 ETH was told it was worth approximately 14 million USD. When that representation becomes false, the DAO should hear about it before the next tranche leaves the treasury, not at the next annual report. This creates audit complexity. Four line items in the quarterly report: target allocation, current allocation, trigger status, and ENS compensation policy status. Each can be read from the Foundation's on-chain wallets and the compensation escrow. No new data source required. The Foundation could hedge on its own. It could, and the policy should say whether it will and how. The objection against this amendment is that no policy is needed. That is the current default: the Foundation will hedge as it sees fit, report annually, and the DAO will learn about currency decisions after they have been made. ENS compensation adds a second default of the same kind: the board decides disposition, unvested tokens sit in undisclosed status, and the DAO finds out in the annual report. Brantly Millegan's concern that a board chosen by the proposing party is not independent (x.com/BrantlyMillegan/status/2072052399978819584) applies here in a specific way: currency policy set entirely at director discretion, without a ratified framework, is one more decision that the DAO cannot second-guess without a full removal vote. Clause 1 gives the DAO a ratified policy to point to. What would change my mind: a Cayman entity law constraint that makes DAO ratification of a treasury allocation policy unenforceable, combined with evidence that Foundation directors are already required by fiduciary duty to rebalance on reasonable terms. If those two conditions hold, the substance of this amendment is already legally required and the ratification step adds only a publication obligation - which I would still want, but which is a weaker claim than what is argued here. Also: if the Payroll Can Vote amendment is adopted separately and already requires a vesting and disposal policy for the ENS compensation, Clause 4 of this proposal becomes redundant, and the two should be merged rather than duplicated. Scope and cost: the Treasury Allocation Policy is a governance document, not infrastructure. The rebalancing trigger requires one quarterly on-chain balance check against a ratified baseline. Compliance cost is a few hours of reporting per quarter. The first dollar funds drafting the initial policy template, setting the currency basket and rebalancing threshold. A minimum useful version is Clauses 1 and 2 with a ratified 70% threshold and the first quarterly report. Saturation is approximately 1,500 USD, covering policy drafting, the initial compliance template, and verification of the ENS compensation clause against the vesting escrow architecture - after which the mechanism runs on existing reporting obligations with no additional spend.